Currently, a single trading facility such as an exchange may offer over 100,000 of its own derivative products and handle over 650 million quotes per day for all derivative products. The large number of quotes per day for derivative products causes practical problems for trading facilities to efficiently handle the large amounts of data associated with quotes.
Many of the quotes for derivative products are quotes for a small number of derivatives with similar prices. The problems associated with the large amounts of data created by quotes on derivative products will increase if the format for derivative quotes changes from the current nickel/dime increments to penny increments. Buy and sell orders for derivatives are currently offered in nickel increments for derivatives costing under $3.00 and dime increments for derivatives costing over $3.00. Investors desire the ability to submit buy and sell orders in smaller monetary increments for derivatives. However, changing the standard for derivative quotes from nickel/dime increments to penny increments will greatly increase the number of derivative quotes, and thus the amount of data that must be handled by the trading facilities. It would therefore be desirable to have a way to trade derivatives in smaller monetary increments while avoiding increased data traffic.